Last year, Forest Products issued both 5-year and 10-year bonds at par. The bonds each have...

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Last year, Forest Products issued both 5-year and 10-year bonds at par. The bonds each have a coupon rate of 5.5 percent, pai

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Answer 1

Answer #1

Calculating Price of 5 year Bond

using TVM Calculation,

PV = [FV = 1,000, PMT =27.50, N = 8, I = 0.074/2]

PV = $935.24

Change in Price = (935.24 - 1,000)/1,000 = -6.48%

Calculating Price of 10 year Bond

using TVM Calculation,

PV = [FV = 1,000, PMT =27.50, N = 18, I = 0.074/2]

PV = $876.75

Change in Price =(876.75 - 1,000)/1,000 = -12.33%

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Answer 2

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